FAQs

At Assetz, we believe in guiding you with expert advice on the types of home loans available, the necessary documentation and the eligibility criteria. Do reach out to us if you have further queries.

01
What are the types of home loans available?
SHOW

HOME PURCHASE LOAN
The common loan for purchasing a home.

HOME IMPROVEMENT LOAN
A loan given for undertaking repairs, renovations and/or upgradation of your home.

HOME CONSTRUCTION LOAN
A loan for the construction of a new home.

HOME EXTENSION LOAN
Home extension loans are given for expanding or extending an existing home. For example, addition of an extra room, etc.

HOME CONVERSION LOAN
A loan available for those who have financed the present home with a Home Loan and wish to purchase and move to another home for which some additional funds are required. Through a Home Conversion Loan, the existing loan is transferred to the new home, including the additional amount required, eliminating the need for pre-payment of the previous loan.

LAND PURCHASE LOAN
This type of loan is sanctioned for purchase of land for home construction.

BRIDGE LOAN
The Bridge Loan is designed for people who wish to sell the existing home and purchase another. The bridge loan helps finance the new home, until a buyer is found for the old home.

BALANCE TRANSFER LOAN
Balance Transfer Loans help you pay off an existing home loan by availing a new loan from another willing lender institution.

REFINANCE LOAN
This loan helps you pay off the debt you have incurred from private sources such as relatives and friends, for the purchase of your present home.

LOAN TO NRIs
This loan is tailored for the requirements of Non Resident Indians (NRIs) wishing to build or buy a home in India. These loans are provided by eligible financial institutions in accordance with the guidelines issued by the Reserve Bank of India from time to time.

02
What is an EMI?
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EMI (Equated Monthly Instalment) is the amount payable to the lending institution every month, till the loan is paid back in full. It consists of interest due, as well as a portion repayable towards the principal.

03
What are the incentives offered by lending institutions?
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a) Some of the lending institutions sanction the loan in-principal in advance of your identifying the property

b) Free accident insurance

c) Waiving of pre-payment penalty

d) Waiving of processing fee

e) Free property insurance

04
What are the eligibility conditions for a home loan?
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To qualify for a home loan, most of the lending institutions in India require you to be:

a) An Indian resident or NRI

b) Above 21 years of age at the commencement of the loan

c) Below 65 when the loan matures

d) Either salaried or self employed and

e) Worthy of credit facility

For more details, refer module on "What are you getting into?"

05
What are the interest rates offered for home loans? What are: Daily Reducing, Monthly Reducing and Yearly Reducing?
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Interest rates vary from institution to institution and presently range from 8.5% to 10% depending on the customer classifications. The interest on home loans in India is usually calculated on monthly reducing balance. In some cases, daily reducing basis is also adopted.

ANNUAL REDUCING
In this system, the principal, for which you pay interest, reduces at the end of the year. Thus you continue to pay interest on a certain portion of the principal which you have actually paid back to the lender through EMIs paid during the year. This means the EMI for the monthly reducing system is effectively less than the annual reducing system.

MONTHLY REDUCING
In this system, the principal, for which you pay interest, reduces every month as you pay your EMI.

DAILY REDUCING
In this system, the principal, for which you pay interest, reduces from the day you pay your EMI. EMI in the daily reducing system is less than the monthly reducing system.

06
What is the best way to select the cheapest home loan?
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Calculate the total amount payable under the different loan options available for a fixed loan period and amount. The loan under which minimum total amount is payable will be the cheapest source of funds.

07
What is a fixed rate of interest?
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Fixed rate of interest means that the rate of interest remains unchanged for the specified duration of the loan. This means you do not benefit if rates of interest drop in the market. Similarly you do not lose if rates of interest increase. Under fixed home loan rates, banks/HFCs retain the right to increase the rate of interest after the prescribed interval. This provision is mentioned in the loan agreement. This is known as reset clause in fine print.

08
What is a floating rate?
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This is the rate of interest that fluctuates according to the market lending rate. This means you stand the risk of paying more than you budgeted for, in case the lending rate goes up.

09
What are the other costs that usually accompany a home loan?
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a) PROCESSING CHARGE: A fee payable to the lender on applying for a loan. It is either a fixed amount or may be a percentage of the loan amount applied.

b) PRE-PAYMENT PENALTIES: When a loan is paid back before the end of the agreed duration, a pre-payment charge is demanded by some banks/companies, which is usually between 1% and 2% of the amount being pre-paid.

c) COMMITMENT FEES: Some institutions levy a commitment fee in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned.

d) MISCELLANEOUS COSTS: It is quite possible that some lenders may levy documentation, consultant charges and franking charges.

e) Registration of mortgage deed.

10
What are the repayment period options?
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Repayment period options range between 5 to 20 years.

11
How do banks/HFCs decide on the loan amount?
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Usually, most companies give home loans up to a maximum of 85% of the cost of the house. Balance 15%, sometimes called 'seed money', has to be provided by the loan applicant upfront. The amount, for which the applicant is eligible, is determined by the age, income, number of dependents, monthly outgoing and repayment capacity. This varies from case to case.

12
Are securities required for home loans?
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In most cases, the property to be purchased itself becomes the security and is mortgaged to the lending institution till the entire loan is repaid. Some institutions may ask for additional security such as life insurance policies, FD receipts and share or savings certificates.

13
Do I require a guarantor to get a home loan?
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Some institutions ask for guarantors.

14
What is the time required for loan application approval?
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It varies from 3 to 15 days.

15
What is the time required for loan disbursement?
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On an average, loans are disbursed within 3 to 15 days after satisfactory and complete documentation and completion of all relevant procedures, including proof that 20% or 25% of the cost has been paid upfront to the seller of the property.

16
Can I make a joint application for home loans?
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Most institutions are willing to consider the joint incomes of the applicants to decide the loan amount. Some institutions do not require the co-applicants to be co-owners of the property to be purchased.

17
What are the tax benefits of home loans?
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Both principal as well as interest of home loans attract tax benefits, under section 80C of the
Income Tax Act 1961:

INTEREST PAID ON THE HOME LOAN
As per Sec 24(b) of the Act, a deduction up to Rs. 200,000 towards the total interest payable on the home loan towards purchase/ construction of house property can be claimed while computing the income from house property. The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual instalments commencing from the year in which the house has been acquired or constructed. Please remember that in case of self occupied property, this deduction is allowed only for one such self-occupied property. The interest towards home loan taken for purchase, construction, repairs, renewal or reconstruction of house property is eligible for deduction under section 24(b).

In case the property for which the home loan has been taken is not self-occupied, i.e., second home, no maximum limit has been prescribed and the taxpayer can take tax deduction of the whole interest amount under Section 24.

PRINCIPAL REPAYMENT OF THE HOME LOAN
As per Section 80C of the Act, the principal repayment up to ₹ 150,000 on your home loan will be allowed as a deduction from the gross total income subject to fulfilment of prescribed conditions.

18
Should one go for a long-term home loan ?
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If you can afford to, then opt for the 15 or 20 year loan repayment option. The interest rate will be lower, you own your home in half the time, and the payments are not significantly higher.

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DOCUMENTS CHECKLIST

RESIDENT INDIAN ACCOUNTS
VIEW FOR NRI ACCOUNTS
1 PAN Card
copy along with another ID copy (Passport/Driving License/Voter ID)
2 Address Proof
(Passport/Voter ID/Latest HR letter
from employer)
3 Latest Employer Letter
mentioning date of joining, current designation and employment status - whether permanent or not
4 Copy of Employee ID
5 Current Company's Offer Letter
6 Previous Company's Relieving + Experience Letter
5 Current Company's Offer Letter
6 Previous Company's Relieving + Experience Letter
7 Monthly Salary Slips
Latest 3 months salary slips, from both applicant and co-applicant
8 Bank Account Statement
Latest 6 months bank account statements where your salary has been credited
9 Form 16
Latest 2 years Form 16. (Assessment Year 2014-15 and 2015-16)
10 Income Tax Returns
Latest 2 Years Income Tax Returns. (Assessment Year 2014-15 and 2015-16)
11 Loan Details
Existing loan account details and loan statements, till date (if any)
VIEW FOR NRI ACCOUNTS